Government consults on changes to early years funding system
Proposals include a single targeted funding stream for children with additional needs, fewer local supplements and lower or no annual Ofsted fees, with most changes proposed from 2028 to 2029.
At a glance
date the consultation closes
- The Department for Education is consulting on proposed changes to how early years entitlement funding is distributed.
- Proposals include a single targeted funding stream for children with additional needs and fewer local supplements.
- Most changes are proposed to come into force in 2028 to 2029, with some transitional arrangements in 2027 to 2028.
The Department for Education (DfE) has launched a consultation on proposed changes to how early years entitlement funding is distributed in England.
The DfE said the proposals aim to improve access to childcare for families on low incomes, and support for children with special educational needs and disabilities (SEND).
It is proposing that most changes come into force in the 2028 to 2029 financial year, with some transitional arrangements in 2027 to 2028. The consultation closes on 14 September 2026.
What is proposed
- Replacing local special educational needs inclusion funds and the Disability Access Fund with a single targeted funding stream from 2028 to 2029.
- Building upfront inclusion funding, currently the Inclusive Early Years Fund, into the rates paid to local authorities from 2028 to 2029, passed on through a new mandatory inclusion supplement.
- Reducing local funding supplements from five categories to three from 2028 to 2029: deprivation, inclusion and site specific.
- Allowing local authorities to pass unused contingency funding on to providers during the year, from 2027 to 2028.
- Asking local authorities to pass on more of their early learning for 2-year-olds funding to providers, to support disadvantaged children.
- Testing the idea of removing or reducing annual Ofsted Early Years Register fees, with some of Ofsted's costs funded instead by a top-slice of entitlement funding.
- Beginning, from 2028 to 2029 or beyond, to fund local authority central services through a separate grant.
The DfE also plans to update the data in its funding formula for 2027 to 2028, including newer labour cost data.
It said its illustrative modelling, based on 2026 to 2027 funding rates for 2-year-olds, shows what could happen without protections. Some local authorities could see rate increases of more than 9%, while others could face reductions of up to 12%.
The DfE expects to introduce transitional protections in 2027 to 2028. It will confirm final 2027 to 2028 funding rates in autumn 2026.
The National Day Nurseries Association (NDNA) welcomed some of the changes but said more was needed.
“However, providers juggling the financial pressures they face on a day to day basis will be disappointed that more widespread reform is not included in this package.”
For your setting
What this means for your setting
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Does this apply in Scotland? These proposals apply to early years funding in England only.
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Sources
- Changes to the funding system for early years entitlementsDepartment for Education · 6 July 2026
- Early years funding: proposed changes to the entitlements funding system (consultation document)Department for Education · 6 July 2026
- Give your views on how EY funding formula is distributedNational Day Nurseries Association · 6 July 2026
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Contains public sector information licensed under the Open Government Licence v3.0. Licence.
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